NOORMOHMAD UMMARBHAI VOHRA,ANAND vs. THE INCOME TAX OFFICER, WARD 1, ANAND, ANAND, GUJRAT

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ITA 2137/AHD/2025Status: DisposedITAT Ahmedabad02 September 2026AY 2017-1811 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal condoned the delay in filing the appeal. It held that the addition under Section 69A was unjustified as the cash deposits were supported by the cash book and regular business receipts. The addition under Section 68 was deleted as the amount represented a reclassification of an opening balance and not a fresh loan. The rejection of books of accounts and estimation of income were also found to be unjustified.

What were the facts?

The assessee's appeal was filed with a delay of 97 days due to the assessee's wife's medical issues and lack of familiarity with tax proceedings. The Assessing Officer made additions under Sections 69A and 68 of the Income Tax Act, and rejected the assessee's books of accounts under Section 145(3). The CIT(A) dismissed the assessee's appeal.

What were the issues?

Whether additions made under Section 69A and Section 68 were justified, and if the rejection of books of accounts under Section 145(3) was proper, especially considering the refusal to admit additional evidence.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 69A,Section 68,Section 145(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, B” BENCH, AHMEDABAD

IN THE INCOME TAX APPELLATE TRIBUNAL "B” BENCH, AHMEDABAD DR. B.R.R. KUMAR VICE PRESIDENT SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No.2137/AHD/2025 (Assessment Year:2017-2018) Noormohmad Ummarbhai Vohra Prop.of Anand Fruit Co., Vegitable Market, Station road near JunadadarAnand-388001, Gujarat [PAN:ACWPV8707F] …………. Appellant Vs The Income Tax Officer, Ward 1, Anand Anand-388001, Gujarat …………. Respondent Appearance For the Appellant/Assessee : Shri Sunil Talati : For the Respondent/Department Shri Abhijit, Sr.DR Date : Conclusion of hearing 10.06.2026 : Pronouncement of order 02.09.2026

O R D E R Per Rahul Chaudhary, Judicial Member: 1. The present appeal preferred by the Assessee is directed against the Order, dated 09/06/2025, passed by the National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as the 'CIT(A)'] whereby Learned CIT(A) had dismissed the appeal against the Assessment Order, dated 24/12/2019, passed under Section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as 'the Act'], for the Assessment Year 2017-2018).

2.

The Assessee has preferred the present appeal after a delay of 97 days. In the application seeking condonation of delay it has been stated that the delay in filing appeal was on account of the fact that the intimation of impugned order having been passed was not received by the

ITA No.2137/AHD/2025 Assessment Year 2017-2018 Assessee and his chartered accountant; the Assessee was not well versed with the tax proceedings and appeal procedure and his wife, at the relevant time, was facing medical issues. Taking note of the aforesaid explanation offered by the Assessee, which is supported by duly sworn affidavit, we conclude that the Assessee was prevented by sufficient cause from filing the present appeal within the prescribed time. Accordingly, in view of the judgment of the Hon’ble Supreme Court in the case of the Collector, Land Acquisition Vs. Katiji & Others [167 ITR 471 (SC)], we condone the delay of 97 days in filing the present appeal and proceed to adjudicate the grounds raised:

1.

The Ld. CIT(A) has erred in confirming the addition of Rs. 34,10,000/- u/s. 69A of the Act towards cash deposits during the demonetization period, without appreciating that the appellant had furnished the cash book, details of sales, withdrawals, and cash balance as on 08.11.2016. The Ld. CIT(A) has confirmed addition without appreciating the documentary evidences and explanations submitted during assessment and appellate proceedings and sustained merely on assumptions. Hence, the confirmation of such addition is unjustified and deserves to be deleted. 2. The Ld. CIT(A) has erred in law and on facts in confirming the addition of Rs. 17,00,000/- u/s. 68 of the Act, treating the same as unexplained cash credit, without appreciating that the said amount represented mere reclassification from sundry creditors to unsecured loans, which were duly reflected in the audited financial statements of earlier year and supported by confirmation and ITR of creditor. Further, Ld. CIT(A) failed to appreciate that the appellant has not received any additional loan from any party during the year under consideration, thus no case of unexplained cash credit will arise. The Ld. CIT(A) failed to verify and appreciate the evidences placed on record, thereby confirming the addition arbitrary and deserves to be deleted. 3. The Ld. CIT(A) has erred in confirming the rejection of books of accounts u/s. 145(3) of the Act and sustaining an ad hoc estimation of income at Rs. 30,00,000/-, without pointing out any specific defects in the books of account. The appellant, being a small trader in perishable commodities operating in an unorganized sector, had maintained regular books of account duly audited. The estimation so upheld is excessive, arbitrary, and devoid of any rational or comparable basis. It is respectfully concluded that the additions so confirmed deserve to be deleted in the interest of justice and equity. It is submitted that the same be held so now. 4. The Ld. CIT(A) has erred in law and on facts in refusing to admit and consider additional evidences filed during appellate proceedings, such as confirmations, ledgers, and supporting

ITA No.2137/AHD/2025 Assessment Year 2017-2018 purchase and sales bills, which were crucial for proper adjudication of the matter. The rejection of such evidences on mere technical grounds, without appreciating application made before Ld. CIT(A) for production of certain additional evidences and affording the appellant a reasonable opportunity, is in violation of Rule 46A of the Income Tax Rules, 1962, and contrary to the principles of natural justice. It is submitted that the same be held so now. 3. Briefly stated, the facts of the case are that the Assessee is an individual carrying on business as a proprietor of ‘M/s. Anand Fruit Co’. and is engaged in the business of purchase/sale, fruits as commission agent. For the Assessment Year 2017-18, the Assessee filed original Return of Income on 01/11/2017 which was selected for scrutiny for verification of undisclosed cash deposits reported during the demonetization period.

4.

During the course of assessment proceedings, the Assessing Officer issued various statutory notices and in response to the same, the Assessee furnished modified audit report under Section 44AB of the Act. It was explained that the original tax audit report filed by the Assessee was made on the basis of account containing clerical errors and omission. According to the Assessing Officer the modified tax audit report revealed substantial changes in turnover, purchase figures, and liabilities, with sales increasing from INR.36,68,258/- to INR.5,34,18,652/- and purchases from INR.34,76,470/- to INR.5,32,26,864/-. The cash-in-hand balance was also revised from INR.1,71,413/- to INR.6,27,413/- In view of the aforesaid, the Assessing Officer rejected the books of accounts of the Assessee invoking provisions of Section 145(3) of the Act reasoning that the assessee altered financial statements multiple times and failed to produce primary supporting vouchers, quantitative details, or bills for purchases, sales, freight, and labour. Consequently, the Assessing Officer made the addition of INR.30,00,000/- estimating profit of the Assessee from the business and made net addition of INR.22,17,490/-. The also made addition of INR.34,10,000/- u/s 69A of the Act on account of cash deposits made during the demonetization period (out of total cash deposits of INR.49,60,000/- made during the relevant

ITA No.2137/AHD/2025 Assessment Year 2017-2018 period after giving relief for the first installment of cash deposits of INR.15,50,000/- made by the Assessee). Further, the Assessing Officer made addition of INR.17,00,000/- under Section 68 of the Act as unexplained unsecured loan from Royal Fruit Company.

5.

Aggrieved by the above assessment from on the Assessee vide Assessment Order, dated 24/12/2019, the Assessee filed appeal before the Learned CIT(A) and moved application for admission of additional evidence under Rule 46A of the Income Tax Rules, 1962. The Learned CIT(A) refused to admit the additional documentary evidence; and dismissed the appeal vide Order, dated 09/06/2025.

6.

Being further aggrieved, the Assessee has preferred this present appeal before this Tribunal on the grounds reproduced in Paragraph 2 above.

7.

We have heard the rival submissions and have perused the material on record.

Ground No. 3 & 4 8. We would first take up Ground No. 4 and 3 raised by the Assessee relating to rejection of books of account and estimation of business profits, respectively.

9.

We have heard both the parties on this issue and perused the materials on record.

10.

The Ld. Authorised Representative had vehemently contended that the Assessee was a small-time fruit commission agent and vendor. It was submitted that due to a genuine system/clerical error on part of the accountant, who had lost the data from his pen drive, mistakes had crept into the original audit report prepared by the auditor. There were errors and omissions which were corrected subsequently. The modified audit report was filed during the assessment proceedings on 07/11/2019, the Assessing Officer refused to accept the corrected figures and rejected the books on accounts alleging lack of primary

ITA No.2137/AHD/2025 Assessment Year 2017-2018 purchase/sale bills, vouchers, and ledger confirmations. During appellate proceedings, the Assessee filed these crucial documents (including confirmations, ledgers, and sample purchase and sales bills) as additional evidence. However, the Learned CIT(A) refused to admit or even examine them under Rule 46A of the Income Tax Rules, 1962 [for short ‘IT Rules’] noting that the assessee did not make the request for admission of addition evidence in the memorandum of appeal in Form 35 and had also failed to establish sufficient cause for not filing the same before the Assessing Officer. It was further submitted that the change in figures pointed out by the Assessing Officer were on account of recording to transaction of purchase/sale of fruits as commission agent on ‘net basis’ in the first instance which was subsequently recorded on ‘gross basis’ (recording the actual sale and purchases instead of net profit/commission). It was further submitted that the Assessing Officer had rejected the books primarily because of the irreconcilable differences between the original audit report and the modified audit report submitted during assessment, and the non- production of primary purchase and sales bills, freight and labour vouchers. When the same were furnished before the Learned CIT(A) the same were not admitted and addition made on adhoc basis was confirmed.

11.

On the other hand, the Learned Departmental Representative strongly supported the orders of the lower authorities. It was contended that the Assessee had changed his audit reports and financial figures multiple times, which demonstrates the unreliable nature of his books, and failed to explain why these documents were not submitted before the Assessing Officer despite being granted adequate opportunities. It was further submitted that the Learned CIT(A) was justified in refusing to admit the additional evidence in the absence of valid reasons satisfying the conditions of Rule 46A of the IT Rules.

12.

We have carefully considered the rival contentions. In the present case, it is admitted position that the Assessee is operating in unorganized

ITA No.2137/AHD/2025 Assessment Year 2017-2018 and perishable fruit market. The Assessee had placed before the Assessing Officer the modified tax audit report and supporting documents. The Assessing Officer rejected the modified tax audit report and the reasons offered by the Assessee citing non-furnishing of underlying documents. During the course of hearing the Learned Authorised Representative for the Assessee had explained the difference in figures was on account of recording of purchase/sale transaction on ‘gross basis’ (as opposed to ‘net basis’). The Assessee had also filed affidavit of the accountant wherein the accountant had stated that the on account of error/omission while transferring data incomplete information was sent to the tax auditor which warranted modification of the original tax audit report. We note that the initial notices sent by the Assessing Officer during the assessment proceedings were not responded to by the Assessee. In response to the notice dated 21/12/2019, the Assessee filed reply. Taking the same into consideration the Assessing Officer passed by the Assessing Officer on 24/12/2019. Therefore, the Assessee furnished additional evidence before the Learned CIT(A) to counter the reasoning given by the Assessing Officer. However, the Learned CIT(A) rejected the additional evidence observing that the Assessee had not moved application for admission of additional evidence. The aforesaid finding returned by the Learned CIT(A) is factually incorrect. Perusal of record shows that the Assessee had moved application dated 18/05/2021 which was accompanies by affidavit of the accountant, dated 08/03/2021. [placed at pages 84 to 90 of the paper-book – Vol 1 filed by the Assessee]. Therefore, we overturn the order passed by the CIT(A) in this regard and admit the additional evidence furnished by the Assessee. Consequently, the order passed by the Learned CIT(A) confirming the order of the Assessing Officer rejecting the books of account also set aside. Further, we are of the view that even in the event that books were to be rejected, it is a settled judicial position that the estimation of profit cannot be arbitrary or ad-hoc. The estimation must have a rational, comparative, or historical basis, such as the Net Profit (NP) or

ITA No.2137/AHD/2025 Assessment Year 2017-2018 Gross Profit (GP) rates of the Assessee in the preceding years. In the present case the Assessing Officer has estimated business profits on an ad-hoc basis at INR.30,00,000/-. Therefore, we are of the view that the addition of INR.22,17,490/- made by the Assessing Officer on the basis of ad-hoc estimation of profits of the Assessee at 30,00,000/- cannot be sustained and the same is also deleted.

13.

Thus, Ground No. 3 and 4 raised by the Assessee are allowed.

Ground No. 1 14. Ground No. 1 pertains to addition of INR.34,10,000/- made by the Assessing Officer under Section 69A of the Act which was sustained by the Learned CIT(A). We have considered the rival submissions and have perused the relevant material pertaining to this issue.

15.

We note that the Assessing Officer had observed that the Assessee made deposit of INR.49,60,000/- in Specified Bank Notes (SBNs) during the demonetization period. It is admitted position that the Assessing Officer had accepted the source of cash deposit of INR.15,50,000/- made on 10/11/2016 as business receipts. However, the Assessing Officer treated the subsequent deposits made by the Assessing Officer between 13/11/2016 and 21/12/2016 aggregating to INR.34,10,000/- as unexplained money. We note that sole reason given by the Assessing Officer while holding as aforesaid was that the Assessee should have deposited the entire cash-in-hand in one or two installments and that piecemeal deposit of SBNs was highly suspicious. In appeal the Learned CIT(A) sustained the addition observing that the cash book furnished by the Assessee could not be relied upon as the books were rejected.

16.

In our view the above reasoning given by the Assessing Officer for rejecting the explanation offered by the Assessee is based upon suspicion and assumptions. During the course of hearing the Learned Authorised Representative for the Assessee had contended that the

ITA No.2137/AHD/2025 Assessment Year 2017-2018 cash deposits were fully supported by the cash-book showing adequate cash balance representing accumulated regular business receipts and withdrawals made prior to the demonetization period. We note that it is admitted position that the Assessee was engaged in business where transactions were undertaken in cash. The Assessing Officer had accepted similar cash deposits made in the bank account during the relevant previous year while rejecting identical cash deposits made in demonetization period. In our view, the Learned CIT(A) failed to consider this aspect of confirmed the addition by merely stating that books of account could not be relied upon without considering the additional evidence furnished by the Assessee. As noted hereinbabove, the cash book was not rejected by the Assessing Officer in entirety as the Assessing Officer had accepted INR.15,50,000/- as genuine cash- in-hand recorded in the same cash book means. For the aforesaid reason also we hold that the cash book maintained and furnished by the Assessee could not have been simply brushed aside merely on account of the fact that the Assessee had made cash deposits in multiple installments rather than a on a single day. Perusal of cash book and bank statements shows that regular cash despots were made by the Assessee during the relevant previous year. We are of the view that the subjective view of the Assessing Officer regarding ‘ideal’ bank deposit pattern during the demonetization period cannot be accepted in the facts and circumstances of the present case. In view of the aforesaid, we hold that the addition of INR. INR.34,10,000/- made by the Assessing Officer under Section 69A of the Act cannot be sustained and is, hereby, deleted. Thus, Ground No. 1 raised by the Assessee is allowed.

Ground No. 2 17. Next we will take up Ground No. 2 raised by the Assessee which is directed against the addition of INR.17,00,000/- made by the Assessing Officer under Section 68 of the Act which was sustained by the Learned CIT(A). We have considered the rival submissions and have perused

ITA No.2137/AHD/2025 Assessment Year 2017-2018 the relevant material pertaining to this issue.

18.

During the assessment proceedings, on perusal of the Balance Sheet of the Assessee for the relevant previous year, the Assessing Officer formed a view that ‘new unsecured loan’ of INR.17,00,000/- were taken by the Assessee during the year. Therefore, the Assessee was required to prove identity, creditworthiness of Lender and the genuineness of the transaction. Since the Assessing Officer was of the view that the Assessee had only furnished partial details, the Assessing Officer held that the Assessee had failed to discharge the primary onus and therefore, addition of INR.17,00,000/- was made in the hands of the Assessee under Section 68 of the Act. Before the Learned CIT(A), the Assessee contended that the Assessee had not received any fresh unsecured loan from any party during the year under consideration. It was submitted that M/s Royal Fruit Company was an existing trade creditor from the preceding years and this was a case of mere reclassification of an opening creditor. However, the Learned CIT(A) confirmed the aforesaid addition noting that the Assessee had repeatedly modified financial statements, and the books of the Assessee had been found to be unreliable. Being aggrieve the Assessee has carried the issue in appeal before this Tribunal.

19.

We note that the Assessee had submitted the Ledger Account, Confirmation Letter, PAN, and Income Tax Return of M/s Royal Fruit Company as additional evidence before the Learned CIT(A) to demonstrate that there was no fresh loan transaction, and that there was a mere adjustment/reclassification of a past liability. We have already concluded hereinabove that the Learned CIT(A) was not justified in rejecting the application for admission of additional evidence and had admitted the additional evidence. It is a established legal position that Section 68 of the Act can only be invoked when a sum is found credited in the books of an assessee maintained for the relevant previous year, and the assessee offers no explanation or an unsatisfactory explanation about its source. However, Section 68

ITA No.2137/AHD/2025 Assessment Year 2017-2018 cannot be applied to opening balances or to mere journal entry reclassifications of pre-existing trade liabilities carried forward from preceding years, where no fresh credit has passed into the accounts in the current fiscal. We have admitted the additional evidence while allowing Ground No. 4 raised by the Assessee. We note that the Assessee had placed on record (a) Copy of Acknowledgment of ITR, Computation, PAN Card of Royal Fruit Company for AY 2017-18. (b) Confirmation letter from Royal Fruit Company (c) Ledger confirmation for balance of M/s. Anand Fruit Co. in the books of Royal Fruit Company for FY 2016-17, (d) Ledger copy of Royal Fruit Company under Unsecured Loan in audited financial statement. On perusal of the aforesaid documents [placed at pages 198 to 203 of the paper-book], we find that the sum of INR.17,00,000/- represents opening balance and no fresh unsecured loan or money was received during the relevant previous year under consideration. Therefore, the Assessing Officer is directed to delete the addition of INR.17,00,000/-. Thus, Ground No. 2 raised by the Assessee is allowed.

20.

In result, the present appeal preferred by the Assessee is allowed.

Order pronounced on 02.09.2026.

4.

Sd/- Sd/- (Dr. B.R.R. Kumar) (Rahul Chaudhary) Vice President Judicial Member

िदनांक Dated :02.09.2026 अहमदाबाद Ahmedabad; H.C. PS

ITA No.2137/AHD/2025 Assessment Year 2017-2018 आदेशक��ितिलिपअ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent. 3. संबंिधतआयकरआयु�/ Concerned CIT 4. आयकरआयु�(अपील) / The CIT(A) 5. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण/ DR, ITAT, 6. गाड�फाईल /Guard file. आदेशानुसार/BY ORDER, उप/सहायकपंजीकार (Dy./Asstt.Registrar) आयकरअपीलीयअिधकरण, अहमदाबाद / ITAT, Ahmedabad

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